S.K.I. Beer Corp. v. Baltika Brewery

July 13, 2006

S.K.I. BEER CORP., PLAINTIFF,v.BALTIKA BREWERY, DEFENDANT.

The opinion of the court was delivered by: Glasser, United States District Judge

MEMORANDUM AND ORDER

INTRODUCTION

The present dispute arises from an agreement between Baltika Brewery ("Defendant" or "Baltika") and S.K.I. Beer Corporation ("SKI" or "Plaintiff").*fn1 SKI contends that Baltika's cancellation of the agreement without notice violated N.Y. Al. Bev. Con. Law § 55-c ("ABCL § 55-c" or "Statute") and constituted a breach of contract. Baltika moves to dismiss based upon a forum selection clause in the Contract (hereinafter, "FSC"), providing for the dispute to be adjudicated in "the Arbitration Court in St. Petersburg and the Leningradskaya Oblast" (Klie Decl., Ex. A, "Contract" ¶ 4).*fn2 For the following reasons, Defendant's motion is granted.

BACKGROUND

The circumstances giving rise to the Complaint are not disputed. The parties entered into an agreement, dated May 27, 2003, in which Baltika agreed to supply SKI with "beer and alcohol-free products" (Contract, ¶ 1.1). The Contract provided that acceptance of goods would be had at the "place of shipment," and that delivery be deemed made when the buyer signed the "shipping documents."*fn3 (Id. ¶¶ 7.1, 7.2). The goods were to be delivered "on the terms FCA (3, 6-th Verkhniy Pereulok, St. Petersburg, Russia) (INCOTERMS 2000)."*fn4 (Contract ¶ 1.1). By the terms "FCA St. Petersburg," or "free carrier St. Petersburg," the goods, as well as the risks and subsequent transportation costs, were transferred from Baltika to SKI in St. Petersburg at the address of the Baltika Brewery identified in the Contract. Thus, Plaintiff assumed both the risks and the costs of transporting the beer out of Russia. The Contract did not specify the final destination for the goods.

The Contract also permitted either party to terminate it unilaterally, provided that "the Parties shall agree mutual payments within 10 days after a request."*fn5 (¶ 13.7). Finally, the Contract contained a mandatory foreign forum selection clause for the Arbitration Court of St. Petersburg,*fn6 and a choice of law provision designating the "laws of the Russian Federation."*fn7 (Contract ¶¶ 11.1, 11.2).

The Complaint alleges that "on or about June 31, 2003, Baltika refused to fill SKI's most recent order, and...indicated that it would not fill any future orders." (Compl. ¶ 14). Plaintiff contends that this constituted a termination of the agreement. Plaintiff asserts two causes of action arising from this termination. The first is a claim under N.Y. Al. Bev. Con. Law 55-c, which prohibits "brewers" from terminating agreements with "wholesalers," unless such termination occurs for "good cause," statutorily defined, or as part of a national wholesale consolidation plan, in which case certain notice procedures are required. (See ABCL 55-c(2)-(5)). The second is a "breach of contract" claim, alleging generally that the termination was in violation of the Contract terms.

DISCUSSION

I. Rule 12 Motion to Dismiss

Defendant moves the Court to dismiss the case under Fed.R.Civ.P. Rule 12(b)(6). On a 12(b)(6) motion, the Court accepts as true the factual allegations in the complaint, viewing it in the light most favorable to the non-moving party. Crespo v. New York City Transit Authority, 2002 WL 398805 (E.D.N.Y. 2002) (Glasser, J.) (citing Bolt Elec., Inc. v. City of N.Y., 53 F.3d 465, 469 (2d Cir. 1992)). Dismissal under Rule 12(b)(6) is only appropriate if "it appears beyond doubt that the Plaintiff can prove no set of facts in support of her claim which entitle her to relief." Walker v. City of N.Y., 974 F.2d 293, 298 (2d Cir. 1992).

There has been some confusion with respect to the applicable legal factors to a challenge based upon a FSC, since it may be raised on a motion to dismiss or on a motion to transfer venue. See, e.g., Haskel v. FPR Registry, Inc., 862 F.Supp. 909, 912-16 (E.D.N.Y. 1994) (discussing the confusion generated by differing standards of analysis of foreign forum selection clauses in The Bremen and Stewart). See M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972) ("The Bremen"); Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 33, 108 S.Ct. 2239, 101 L.Ed.2d 22 (1988). Little time need be spent on this question here, since transfer of venue to a non-federal court is not contemplated under 28 U.S.C. § 1404. It is thus proper to consider the motion under 12(b)(6).

II. Forum Selection Clause

A. Law

In The Bremen, the contract between the parties provided that "any dispute arising must be treated before the London Court of Justice." 407 U.S. at 2. Relying on the FSC, a motion was made to dismiss the action brought in Florida for lack of jurisdiction. In granting the motion, the Supreme Court indicated a strong federal preference for the enforcement of forum selection clauses. It held that a "...forum clause should control absent a strong showing that it should be set aside." Id., at 15.*fn8

Generally, a forum selection clause will only be enforced if it is mandatory or exclusive. John Boutari & Son v. Attiki Importers & Distribs., 22 F.3d 51, 53 (2d Cir. 1994); Central National-Gottesman, 204 F.Supp.2d 675, 678 (2d Cir. 2002). However, even a mandatory or exclusive forum selection clause can be overcome by a showing that the clause is unreasonable:

A clause is unreasonable if: 1) its incorporation into the agreement was the product of fraud or overreaching; 2) the complaining party will be deprived of its day in court due to the grave inconvenience of the selected forum; 3) the chosen law is manifestly unfair so as to deprive plaintiff of a remedy; or 4) the clause is in contravention of a strong public policy of the forum state.

Thus, in the light of present-day commercial realities and expanding international trade we conclude that the forum clause should control absent a strong showing that it should be set aside....The correct approach would have been to enforce the forum clause specifically unless [the non-movant] could clearly show that enforcement would be unreasonable and unjust, or that the clause was invalid for such reasons as fraud or overreaching. 407 U.S. at 15.

B. The Contract's FSC

The foreign forum selection clause here is mandatory (Contract ¶ 4), and is therefore enforceable, provided it is not unreasonable. Plaintiff has not argued that the clause was a product of overreaching, nor has it asserted that it will be denied its day in Court or significantly inconvenienced if it were forced to bring suit in St. Petersburg. Plaintiff has also not alleged manifest unfairness stemming from the clause. Plaintiff's only contention is that enforcing the FSC would contravene the public policy of New York State, which provides contractual safeguards to New York wholesalers.

Baltika's motion proceeds along two general lines of argument, considered in turn. First, Baltika contends that ABCL § 55-c does not apply to out-of-state transactions. Second, it argues that the law does not constitute the type of "strong public policy" capable of defeating a valid FSC.

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